International Trade Documents

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Questions and Answers

What type of documents are used in cross-border trade to effect payment and import?

Commercial Documents

Which of the following Incoterms reflects the extent of the seller's responsibility and liability into the buyer's country?

DDP

What is the primary purpose of the Bill of Lading in bank financing?

As a collateral or security to the ownership of the goods

Which of the following is NOT a type of document used in trade finance?

Sales Invoices Signup and view all the answers

What type of bill of lading is issued when the shipmaster is unable to verify the quality or quantity of the goods?

Received for shipment bill of lading Signup and view all the answers

What is the alternative financing tool for banks, as mentioned in the module?

Bill of Exchange Signup and view all the answers

Which of the following is not a type of transport document?

Commercial Invoice Signup and view all the answers

How do banks primarily deal with trade transactions?

Through trade documents and financing Signup and view all the answers

What is the main purpose of an Insurance Certificate?

To provide proof of insurance Signup and view all the answers

What type of documents are used to effect shipment and transportation of goods?

Transport Documents Signup and view all the answers

What is NOT a characteristic of the Incoterms FAS, FOB, CFR, and CIF?

Are used for air transportation Signup and view all the answers

What is the function of a Bill of Lading as a title document?

To allow the transfer of title by endorsement Signup and view all the answers

Which of the following is a type of Insurance Document?

Marine Insurance Signup and view all the answers

What is the purpose of an Order Bill of Lading?

To allow the bank to retain control on behalf of the seller Signup and view all the answers

Which of the following is not a type of Commercial Document?

Insurance Policy Signup and view all the answers

What does a 'clean' Bill of Lading indicate?

The goods are in line with the invoice Signup and view all the answers

What is the primary advantage of a Letter of Credit for the exporter?

It reduces the risk for the exporter as it deals with documents only Signup and view all the answers

Which method of payment requires a high level of trust between the importer and exporter?

Open Account Signup and view all the answers

What type of documents are used to describe the goods, packaging, and prices in a Letter of Credit?

Commercial documents Signup and view all the answers

What is the primary risk associated with Open Account trading?

The risk of payment default Signup and view all the answers

Which of the following is not a type of document commonly used in a Letter of Credit?

Certificate of origin Signup and view all the answers

What is the purpose of transport documents in a Letter of Credit?

To evidence shipment of goods Signup and view all the answers

Which method of payment involves the banks acting as intermediaries for both the importer and exporter?

Letter of Credit Signup and view all the answers

What type of document is used to specify the terms of payment in a Bill for Collection?

Bill of exchange Signup and view all the answers

Study Notes

Incoterms

CPT, CIP, DAT, DAP, and DDP are rules for sea and inland waterways transport
These rules reflect the extent of seller's responsibility and liability until the goods are delivered to the buyer's country
They determine where delivery of goods is said to have been made

Documents in Trade Finance

Commercial documents: Proforma Invoice, Commercial Invoice, Sales Contract, Packing List
Financial documents: Bill of exchange, Promissory Note, Bank Draft
Insurance documents: Insurance Certificate, Marine Insurance, Insurance Policy, Declaration under open cover
Transport documents: Bill of Lading, Airway Bill, Seaway Bill, Road Transport Bill, Multi Modal bill of lading, Rail Transport Bill
Regulatory documents: Import Duty Report, Clean Report of Inspection (CRI), Combined Certificate of Value & Origin (CCVO), Attested Invoice

The Bill of Lading

A receipt issued by the carrier or its representative to the exporter (shipper)
Evidence of a shipping contract between the carrier and the shipper
Represents a title document to the goods
A receipt for the goods providing information about the condition of the goods being accepted for transportation

Types of Bill of Lading

Straight (non-negotiable) Bill of Lading
Order Bill of Lading (negotiable, consigned to the order of a specified party)

Methods of Payment

Open account: exporter ships goods and sends an invoice with payment terms, high risk of non-payment
Bills for collection: exporter sends title documents to importer's bank through his own bank, specifying payment terms
Letter of Credit (Documentary Letter of Credit): banks act as intermediaries, reducing risk for the exporter, but increasing risk for the importer

DOCUMENTS IN A L/C

Commercial documents: describing goods, packaging, and prices
Financial documents: demand notes, bills of exchange, promissory notes
Transport documents: evidence of shipment of goods
Insurance documents: insurance certificates, policies, etc.
Regulatory documents: specified for importation of goods by a particular country

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